Why is diversity so important for Compliance?

Compliance in the Financial Services sector is in great need of racial diversity.

As long as cultures remain segregated by race, racial diversity is one of the tools to create a well rounded Compliance Department. The ultimate goal is to have mindset diversity but the best way to achieve this is still through racial diversity. people of different cultures question what is given in cultures that are not their own. While an intimate knowledge of a culture is also important. that isn’t what missing in compliance today, or even historically. Compliance needs to be a place that is open to questioning everything in a business. The people most likely to question the givens in a business are those who are not familiar with the culture of that business.

Banking is still very much a white man’s industry. At least, 15% of bank holding companies are non-white. Compliance departments have done a good job of retaining racial minorities. Many Compliance departments are 30% non-white.

Women have fared well in Compliance over the past couple of decades. Many Compliance departments have more than 50% women. There is still plenty of work to be done on the gender equality front because no Compliance department I know of have more than 50% of Chief Compliance Officers (The compliance officers in charge of whole units) are women. Still, the momentum have been there for a long time and parity is within in grasp.

What concerns me is the reasons why women and racial minorities have succeeded in Compliance. The reasons, I suspect, have more to do with the white-male culture of the lines of businesses more than Compliance departments. The cultures of lines of businesses are white and male, and they force women and minorities out. Looking at the executives leading bank units. A few women leaders and almost no racial minorities. Until banking culture is fixed as a whole, departments like Audit and Compliance are going to be places where women and racial minorities will need to take a front seat in order to change the culture because these are the departments that are responsible for pushing back.

The solution I have to staffing the right people in Compliance over the long term is to have promotions be, in great part, an election. Currently, Chief Compliance Officers are chosen by bank executives and approved by bank boards of directors. I think that should remain, but the pool of candidates should be chosen by the compliance departments. More of the department is involved in choosing the pool, more likely that the CCO will be a woman or of color. As a matter of fact, that possibility more than increases by 100%. This solution, obviously, would change compliance departments slowly over time. But that’s the kind of change that is necessary to maintain a talented compliance department while choosing the right leaders. It is a balance between installing CCO’s who can work with the existing team of executives while maintaining the kind of independence necessary to be the best professional.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.